{April 2020} NYC Real Estate in Week 4 of Corona Crisis

We are in week 4 of the Shelter-In-Place order.  Versus the first 3 weeks, when everyone, myself included, was still in shock and emotions were running high, this week I am starting to have people interested in what a recovery might look like.  A peaking of the daily virus cases and recovery of the stock market this week must have helped.  While any prediction is a guess at best especially one predicated upon a vaccine for the virus, I called many friends, some are seasoned brokers, some are in research in finance, to take stock of what the past experience and the current models might tell us. 

 9/11 and the financial crisis of 2008 are the two obvious comparisons.  Most people think this is more like 9/11 than 2008.  9/11 took 4 months for the real estate market to come back.  2008 took 2 years.  The shock effect of the current event is more akin to that of 9/11.  Although we have to see how quickly unemployment goes down this time.  Some Wall Street banks are calling for total economic output to contract ~10% in 2020 from 2019.  The real estate market will also be impacted by foreign buyers who can’t make the trip.  But the flip side of the downward pressure is going to be inventory.  In Feb right before the crisis, Manhattan inventory stood at 9.5 months.  In October last year, inventory peaked at 11 months.  That number has gradually declined from October to February when we also saw the NYC real estate stabilize and transaction volume increase.  Since mid-March, there have been very few new listings.  The first week of April saw something like 70, which gets the monthly new inventory to around a couple hundred. Normally, around 2000 new listings would hit the market in April just in Manhattan.  It is true now it’s a good time to be the opportunistic buyer.  But large discounts are happening mostly in new development.  Discounts also exist in resale, but much far and few in between and only really in listings that have been on the market for 6 months or longer.  This speaks to the resilience of the NYC market.  When the market is bad, people don’t sell.  And this is why the NYC market only went down 25% in 2008, while nationally the decline was 50%.  

Let’s talk about the rental market quickly.  I manage quite a few apartments for my overseas landlords and I fielded more calls from landlords asking about tenants not paying rent in the past two weeks.  You would think with the Governor installing a 90-day moratorium on eviction proceedings, all hell would break loose.  Surprisingly, and for which I count my blessings every day, ALL of my tenants paid April rent.  And data show that 69% of all tenants paid some rent, versus the normally 80-85%.  Roughly in line with unemployment.

Aside from residential, commercial real estate is having a bigger issue, particularly the retail and office sectors.  The majority of retail tenants need some help with paying rent.  And offices!  Will small to medium companies shrink their need for office space after this period when companies and workers are getting more comfortable with working remotely?  I am so curious to see the changes this crisis is going to bring to the world.  I wake up in the middle of the night these days worrying about the changes my business will encounter.  The only solution I know is to adapt and press on.   

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